I suppose it depends on the age of the child but after age 12 or so I would probably explain that these people like the Easter Bunny, Tooth Fairy, Santa, etc. are real enough so long as you choose to believe that they are but that they exist only in our hearts and not in a physical form despite the many people that dress as them for the amusement of others.

My brothers ruined the fantasy for me a long time before it should have been ruined. They are 5 and 8 years older than me, so by the time I realized that there was an Easter bunny, the dream was shattered.